Poverty Reduction Strategy Papers (PRSPs)
are documents required by the International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
(IMF) and World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
before a country can be considered for debt relief
Debt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations. From antiquity through the 19th century, it refers to domestic debts, in particular agricultural debts and freeing of debt slaves...
within the Heavily Indebted Poor Countries
Heavily Indebted Poor Countries is a group of 40 developing countries with high levels of poverty and debt overhang which are eligible for special assistance from the International Monetary Fund and the World Bank.- History and structure :...
(HIPC) initiative. PRSPs are also required before low-income countries can receive aid from most major donors and lenders. The World Bank bases its Country Assistance Strategies, the aid program directed towards low-income countries, on Poverty Reduction Strategy Papers, as do several bilateral donors. PRSPs are intended to help aid recipient countries meet the Millennium Development Goals
The Millennium Development Goals are eight international development goals that all 193 United Nations member states and at least 23 international organizations have agreed to achieve by the year 2015...
(MDGs). They detail a country's plan to promote growth and reduce poverty through implementation of specific economic, social and structural policies. PRSPs provide lending organizations, like the World Bank and the IMF, assurance that aid receiving countries will utilize aid to pursue development outcomes that have been elaborated in the PRSPs and approved by lenders.
The IMF has outlined five core principles for the process through which PRSP's are elaborated. It should be:
- country-driven, promoting national ownership of strategies through broad-based participation of civil society;
- result-oriented and focused on outcomes that will benefit the poor;
- comprehensive in recognizing the multidimensional nature of poverty;
- partnership-oriented, involving coordinated participation of development partners (government, domestic stakeholders, and external donors)
- based on a long-term perspective for poverty reduction.
These core principles are central to the goals of the PRS process.
One central goal is to create a more poverty-focused government. Previously, poverty reduction had been largely a marginalized concern within governments of developing nations. Through the PRSP process, the issue of poverty has moved up in priority, creating more comprehensive plans addressing poverty specifically than ever before. There has also been an increase in “pro-poor” spending within the heath, education and transportation sectors. Due to the demands from the donors to show results, there has been an increase in poverty monitoring through participatory poverty assessments and household surveys.
Civil society involvement
One major function of the PRS is to encourage more participation from the population. The purpose of civil society involvement is to increase the influence of stakeholders in policy creation, program implementation, resource allocation and priority setting. The intent here to culminate a degree of national consensus, thereby creating a poverty reduction strategy that is more representative of stakeholder's interests. The idea behind this is that the PRS will then be owned by the population and will be sustainable, as it suits the needs and capacities of the country.
Ownership of the PRS by the government and population is a very important goal of PRS. It address the ineffectiveness of donor imposition of policy conditions from the outside, a common approach of lending organizations. One way the PRS process encourages ownership is by having governments create their own PRSPs in close consultation with the population. This allows them to take ownership over, and thereby stick to, the strategies they and their population deem necessary to improve conditions in their counties. Additionally, the hope is that in developing a PRSP together, a country will gain a more comprehensive understanding of the poverty issues it faces. The PRSP process is also meant to encourage government leadership in implementing their own strategies by allowing them to allocate the aid money themselves in accordance with the strategies they had drawn up in the PRSP. The emphasis on government leadership stems from the problems that arise when donors establish their own strategy implementation agencies within the client countries, bypassing state agencies and therefore undermining the development of state capacity as well as creating a dependency on aid organizations.
The PRSP process begins with an analysis of poverty within the country, taking into account both quantitative and qualitative data. This analysis becomes the basis for the poverty reduction strategy as it indicates the priority issues. It is important at this stage for the government to initiate civil participation, though to the degree with which this is done varies by country.
One of the most important factors of the PRSP is the participatory process through which it is created. It is vital to increasing country ownership of the PRS and promote accountability. The World Bank outlines the following participatory levels:
- Government participation, including ministries, parliament and sub-national governments
- Stakeholder participation and involvement. This can include civil society groups, women’s groups, ethnic minorities, policy research institutes and academics, the private sector, trade unions and representatives from different regions of the country.
- Participation of bilateral and multilateral external development partners
- Participation and consultation of the poor or their representatives
Participation has been facilitated by civil society organizations, mainly NGOs. However, since there is no clear framework for consultation with the masses, nor a clear definition of participation, many governments are able to conduct and organize it in whichever way they decide. This often results in governments coordinating selective participation and employing other such tactics aimed at diluting public influence over government objectives. Governments have also been unclear on how much they should incorporate the opinions of the poor into their PRSP, especially while also trying to appease the donors. Furthermore, there is no clear criteria on which to judge whether or not the participatory aspect has been fulfilled in the PRSP. This means that the PRSP might be approved by the IMF and World Bank regardless of the lack of true civil society participation in its making.
According to the World Bank's PRS Sourcebook, a PRSP should contain the following:
- A poverty analysis
- A prioritization of the programs needed to achieve development objectives
- Targets and indicators
- A plan for keeping track of progress towards goals and evaluating effectiveness of implementation of programs
- A description of the participatory process in preparing the strategy.
Public Finance Management (PFM)
systems are a component of the PRS that seeks to strengthen fiscal discipline and correctly prioritize allocation of resources, such as public services, in order to maximize efficiency and effectiveness and to get the highest value out of each dollar spent.
Criticism and challenges
Critics argue that the criteria used to judge PRSPs by the World Bank and IMF are actually used to impose neo-liberal policies along the lines of the Washington Consensus
The term Washington Consensus was coined in 1989 by the economist John Williamson to describe a set of ten relatively specific economic policy prescriptions that he considered constituted the "standard" reform package promoted for crisis-wracked developing countries...
, and that these policies tend to increase poverty rather than decreasing it.
Even with an approved PRSP, some countries have difficulty following through with intended policies and therefore do not reach the PRS outcomes. A large factor of this is the misallocation of budgetary funds that were intended to go towards the PRS.
The PRSP process has been scrutinized for increasing aid conditionality even though it was supposedly created to undo the imposition of policy conditions from the outside by increase country ownership. Some have argued that it is a "process conditionality" not a "content conditionality". This differentiation is import because it means donors are only monitoring if the country has made a PRSP and if it was made in a participitory way. However, this might still pose a problem. Since in the past donors were unable to impose content effectively in the client country's policies, it seems unlikely that donors would be able to impose process standards in making a PRSP. It has already been shown that donor's attempts to influence domestic politics have not been successful in the past. Furthermore, International Financial Institutions do in fact evaluate PRSP content, not process alone.
A clear definition of what civil participation means has not been laid out by the IMF or World Bank. This creates a problem when evaluating one of the key requirements of the PRSP, which is that it has to be formulated with civil participation. In fact, participation that involves the population working with the government to develop specific strategies to reduce poverty doesn't exist in any developing country. This seems to suggest that the WB and IMF approve PRSPs regardless of the fulfillment of this condition.